No population bomb

From the op-ed pages of the New York Times, Erle C. Ellis explains, “Overpopulation Is Not the Problem“:

MANY scientists believe that by transforming the earth’s natural landscapes, we are undermining the very life support systems that sustain us. Like bacteria in a petri dish, our exploding numbers are reaching the limits of a finite planet, with dire consequences. Disaster looms as humans exceed the earth’s natural carrying capacity. Clearly, this could not be sustainable.

This is nonsense. Even today, I hear some of my scientific colleagues repeat these and similar claims — often unchallenged. And once, I too believed them. Yet these claims demonstrate a profound misunderstanding of the ecology of human systems. The conditions that sustain humanity are not natural and never have been. Since prehistory, human populations have used technologies and engineered ecosystems to sustain populations well beyond the capabilities of unaltered “natural” ecosystems.

All in all it seems a little better grounded than Paul Ehrlich’s approach in 1968, flatly declaring, “The battle to feed all of humanity is over. In the 1970s hundreds of millions of people will starve to death in spite of any crash programs embarked upon….” Unfortunately for Professor Ehrlich, hundreds of millions of people did not starve to death in the 1970s. His neo-Malthusian pessimism was popular in the Carter administration, but even Carter’s policies at the end tilted a bit more toward markets and optimism and away from bureaucracy and pessimism.

Politicized implementation of U.S. oil import quotas, 1959-1973

The oil import quota system in place from 1959 to 1973 restricted imports to an amount equal to the difference between the federal government’s estimate of domestic oil demand and the estimate of domestic oil supply. But, of course, nothing in industry-protection policy can be easy, so the policy contained a number of adjustments and exclusions.

Chief among exclusion was the “overland exemption” for imports from Canada and Mexico. Hilarity ensues.

120. There is an overland “exemption” for imports from Canada and Mexico. The overland exemption has been construed to include imports from Mexico which are transported by tanker to Brownsville, Texas, where they are entered in bond, transferred to trucks which cross the Mexican border, then re-enter the United States where they are released from bond and are said to have entered by overland means. The oil is reloaded aboard tankers for shipment by sea to the U.S. East Coast. On the other hand, the exemption has not been extended to shipments from Canada across the Great Lakes or to rail shipments from Canada to Ketchikan in Southern Alaska because of a short inland waterway crossing by rail car ferry. The “overland exemption” for both Canadian and Mexican imports are further limited quantitatively by intergovernmental agreements.

From Cabinet Task Force on Oil Import Control, The Oil Import Question, (1970), at pp. 9-10.


Public Choice Theory: Skwire’s First Law

Some time last spring, my friend and occasional KP contributor Sarah Skwire formulated on Facebook what’s now dubbed “Skwire’s First Law”, and we’ve been using it, kicking its tires, and discussing it all summer. In a timely manner (given what we’ve learned this summer about widespread, unwarranted government surveillance and the impending likelihood that yet another president will engage in yet another international military action without Congressional authorization), Sarah has formalized and expanded upon Skwire’s First Law in a Bleeding Heart Libertarians post today:

Accidentally invented by me on Facebook a while back, named by my co-blogger Steve Horwitz, and picked up–to my great diversion–by a crew of Facebook friends, Skwire’s law is simply stated thusly:

Politicians are asshats.

I’m driven to write a bit about Skwire’s First Law today because, like every other day, politicians are being asshats. And I want to talk about how Skwire’s law—though simply expressed—is not merely a sigh of exasperation, a political version of “boys will be boys.” It’s a manifesto condensed into three words.

Saying that politicians are asshats means that you acknowledge the deep truths of public choice theory. It means that even if the occasional politician supports a policy you like or gives a speech you admire, you know enough not to turn him or her into a hero. We can debate, as my friends and I have on Facebook, whether asshats become politicians or politicians become asshats. I don’t think that debate much matters, because I think both parts of it are true. Politics is a machine that turns good people and good ideas into bad ones, and turns bad people and bad ideas into worse ones. Politics is a system that attracts not only people who want to help, but people who want to control. And once those people—good or bad, helpful or controlling—are in the system, they use it to further their ends.

Note in particular the last three sentences, and how they encapsulate the essential implications of public choice theory — in our roles as political actors (here let’s focus on individuals as elected representatives and in regulatory agencies, not as voters), individuals prioritize self interest, broadly defined. This is the extension to the political decision realm of the self-interest assumption in our roles as purposive individuals in other decision settings. Many individual politicians are motivated by good intentions (the “public interest”, making the world a better place, “giving back”, bringing resources to his/her community), and some are also motivated by the desire to control and manage the choices of others and how others live their lives. Public choice theory is general enough to accommodate that diversity of motivation and intent.

More insidiously, though, the fact that political power gives politicians coercive power to make decisions about the resources and the choices of others means that even those who have good intentions and good ideas can, do, and often must use control and coercion to satisfy those intentions and attempt to implement those ideas. Thus even well-intentioned politicians use the system of coercion and control to attempt to achieve their ends. And I hope Sarah doesn’t mind my paraphrasing a Facebook comment of hers on this point, because it’s apt: by definition, politics means using the state’s monopoly on force, and being a politician means that you contribute to decisions that will use that force to enshrine your “honest mistakes or infelicitous actions” in a pretty permanent way in the lives of many, many people, including those the politician says s/he wants to help. If that politician is unaware of that likelihood, or doesn’t care, that’s asshattery. It’s also hubris. And it’s pervasive in politics.

Sarah goes on to point out that this outcome is not accidental or a flaw, although some of us may consider it perverse. Here’s where the study of institutions and incentives becomes important — once these individuals become politicians, they are embedded in a set of institutions that shape their incentives. They face the tragedy of the commons in the federal budgeting process, because to bring resources home to their constituents means either decreasing resources somewhere else that doesn’t matter as much to them or increasing government spending in ways that can unsustainably increase government debt (oh, hey, did you know we’re hitting another government debt ceiling in October?). They trade votes and engage in log-rolling to achieve what they style as “compromise”. The incentives are inherent in the institutions, and they are bad incentives that lead to inferior outcomes and to politicians being asshats. Of course there are nuances and degrees of asshattery, especially if you look on an issue-by-issue basis at the questions you find most pressing. But remember the initial formulation: occasional support that aligns with your preferences does not change the fundamental, underlying institutional incentives.

Note that this asshat designation is not a statement about personal character or merit of the individual politician. It’s a statement about the institutionally-driven incentives facing each individual politician regardless of their motivations or intentions. And that’s what makes it such a pithy and damning statement about the pernicious effects of political decision processes, even (or perhaps especially) political decision processes in what is supposed to be a democratic republic. It is the nature of our political institutions that politicians are asshats, and therefore

[t]hey are wasting your time and your money and your energy. They are allying you with people you hate and with causes you despise and with actions you would never condone.

Don’t wait around for them to save you or the things you think are important. Don’t think you’ve found the politician who can fix your world.

Realizing this nature of political institutions opens up the idea that political processes are not necessarily the only or the best way to approach social conflicts and problems. Thinking about alternatives, about experimenting with different approaches, about the impossibility of doing away with all social problems, gives us opportunities to be creative and to enable other approaches to emerge.

“In the spirit of Apollo, with the determination of the Manhattan Project”: Nixon’s Project Independence

When Arab oil exporters imposed their embargo on the U.S. and the Netherlands in October 1973, George Schultz noted that the United Kingdom and France faced hardly any problem accessing crude oil supplies.Schultz was Secretary of the Treasury at the time and had earlier been in charge of Nixon’s Cabinet Task Force on Oil Import Control.

The United States too, despite the embargo’s intent, faced few problems accessing crude oil supplies–the effect of the embargo was mostly to rearrange tanker routes, at modest additional cost to U.S. importers, and import levels were barely affected. Supplies were not too affected, but world oil prices jumped. The oil import allocation system was not up to the challenges presented by the needed market response, and the result was an uneven pattern of regional shortages and surpluses that were difficult to correct: movements across U.S. government planning regions required government permission.

As I mentioned yesterday, it was the import allocation system in combination with oil price controls that turned the world oil price increase into an energy crisis in the United States.

Economic problems often create political problems for the President. But Nixon, increasingly entangled in Watergate scandal revelations in late 1973, found the growing energy crisis to be a useful political device. On November 7, 1973, the President announced “Project Independence”:

Let us set as our national goal, in the spirit of Apollo, with the determination of the Manhattan Project, that by the end of this decade we will have developed the potential to meet our own energy needs without depending on any foreign energy sources.

Let us pledge that by 1980, under Project Independence, we shall be able to meet America’s energy needs from America’s own energy resources.

No people in the world perform more nobly than the American people when called upon to unite in the service of their country. I am supremely confident that while the days and weeks ahead may be a time of some hardship for many of us, they will also be a time of renewed commitment and concentration to the national interest.

Nixon’s simple political narrative–bad Middle Eastern oil producers were a threat to our economic security–was readily accepted and politicians have seized onto “energy independence” slogans ever since.

Nixon’s popularity had peaked near 67 percent at his second inauguration, January 1973, then began sliding down throughout the year. The Project Independence speech coincided with a stabilization of his popularity around 25 percent, where it remained until his resignation in August of the next year.

RELATED: Peter Grossman’s book, U.S. Energy Policy and the Pursuit of Failure, hammers hard on politician’s invocation of Apollo and Manhattan Project analogies when announcing outsized energy research goals. There is an immense difference, Grossman explains, between pursuing a known technological task at incredible expense and pursuing speculative scientific developments with the goal of fostering a new commercial energy product (fusion power, synfuels, wind power, solar power, cellulosic ethanol fuels, etc.). If the book could only cure politicians of this one failing, it would have been worth Grossman’s efforts in producing it. Of course, as Grossman points out, there are many other political failings as well.

Exit, Voice, and LP&L

For many years Lubbock, Texas was the largest or among the largest cities with dual, competing electric utilities. If a consumer was unhappy with utility A, all it took was a phone call and about three days and the consumer would be hooked up to utility B. Standard economic theory suggests that such an arrangement would be unsustainable, but by most accounts electric rates stayed low and customer service was high. Some of this story is laid out in a 1981 Reason magazine article, “Two utilities are better than one.”

The official history once posted on municipal utility Lubbock Power & Light’s website claimed, “All electric customers in Lubbock have benefited from the decision of those early pioneers to begin retail competition.” It is true. A decade ago rising gas prices caught the city by surprise, LP&L tried to raise its rates noticeably higher than competitor Xcel, and consumers simply switched. Rather than simply stick consumers with the bill for their own lack of management savvy, the city and LP&L were forced into a complicated and unpleasant set of deals that diminished management’s role but kept rates low. Consumer exit protected the power consumer’s pocketbook.

Then, a couple of years ago, city powers that be decided two utilities were more trouble than one, LP&L bought out competitor Xcel in the city limits of Lubbock, and the town’s electric service was monopolized for the first time since September 1917. I blogged about the change, and a few locals objected, but the transaction sailed through without much difficulty.

Fast forward to today. The city council has recently approved a rate increase, implemented right before the summer began and accompanied by a massive billing snafu the first month, and now rather than LP&L being one of the cheapest in Texas it has rates near the state average.  Consumers, who no longer have exit as an easy option, are finding “voice” to be a frustrating experience.

Once you could call the competitor, and a few days later you’d be out. Now you can call your city council member, and when that turns out to be less than satisfying, start grumbling about recall petitions and lamenting the loss of the good old days. But pay your bills on time, or at least make billing arrangements in time, or get cut off.

As one Tech student remarked, “Maybe there is a lesson about competition in there.”

[NOTE: I'm not taking a stand for or against the rate increase. Perhaps it is needed given the circumstances, even though consolidation of the two utilities was supposed to yield cost savings, etc. etc. However, had the city still be in competition mode, I suspect the management plan would have been much different.]

A “stop watching us” smorgasbord

If you follow Knowledge Problem on Twitter, you’ve noticed that I’ve been continuing to comment on and re-tweet various of the developments in the federal government’s surveillance of individuals without obtaining warrants, the Star Chamber-like super-secret FISA courts and our inability to oversee and monitor the lawfulness of their rulings, and this week’s House of Representatives vote on the defense appropriations amendment to restrict NSA funding. Rather than recapitulate all of that here (since others have done good jobs elsewhere and the marginal value of my curation in that area is dwindlingly small), I’ll highlight a few items on the subject catching my attention today:

This is Your Brain on Terrorism: Several writers, myself included, have pointed out that the fear-mongering associated with heightened security in the face of terrorism is based on emotional evaluations of poorly-performed relative risk assessments. In this post from Tuesday, Brian McGlinchey provides a thorough analysis of why our reaction to terrorism compared to, say, riskier things like driving to the airport or getting out of the bathtub is so much more emotional, and how that emotional reaction is grounded in some pretty strong cognitive biases. The more aware we are of those biases, the less likely we are to be swayed by them. As I said in the 2011 post where I talked about this: be indomitable. Refuse to be terrorized.

Lawmakers voting for NSA phone spying get lots of campaign donations from defense companies: “Crony corporatism on line 1!” Eisenhower’s warning about the military-industrial complex, which has mutated into its bastard stepchild, the security-industrial complex (with the complicity of the tech companies making it a silicon-security-industrial complex). Take your pick of which political economy/public choice theory theme fits here, but this new story from Wired shows that the members of Congress who voted not to rein in the NSA’s blanket phone surveillance receive the disproportionate share of campaign donations from the defense industry: “Lawmakers who voted to continue the NSA dragnet-surveillance program averaged $41,635 from the pot, whereas House members who voted to repeal authority averaged $18,765.” 9 of the top 10 donation recipients from the defense industry voted to maintain the NSA’s phone surveillance without changes to transparency, oversight, or funding.

We can’t tell you with whom we are at war: This ProPublica article shows the Kafkaesque absurdity running rampant in the federal government, particularly with respect to security policy. From the “if I told you I would have to kill you” department: Defense officials have told some (not all, some) members of Congress who the “associated forces” are that they are lumping in with Al Qaeda and the Taliban as our opponents in the “War on Terror”, but our elected so-called representatives can’t tell us because the information is classified. Not to mention that the federal government wages this so-called war under the legally shaky AUMF “authorization of the use of military force” rather than a declaration from Congress. Now that I think of it, I think Kafka understated the self-serving absurdity of centralized, controlling bureaucracy.

[waves to good friends at the NSA! Thanks for reading; have a nice weekend!]

How did an oil and gas state come to lead in wind power?

The Great Texas Wind Rush by Kate Galbraith and Asher Price

“The Great Texas Wind Rush” by Kate Galbraith and Asher Price

Kate Galbraith, a reporter for the Texas Tribune, and Asher Price, a reporter for the Austin American-Statesman, have written a great historical review of the development of wind power in Texas.

Admittedly, the book is a little light on the kind of details that the interested energy economist wants to know, but the narrative is strong and the economic clues are there for the interested reader to follow. The book covers the emergence of the industry from the pre-1980s idealists and tinkerers to the 2000’s industrial scale wind farms. Both the hopes and dreams of designers and developers, and the frequent crashing of those dreams, are reported upon. The industry has been boosted by often generous but usually uncertain policies, and challenged by sometimes high and sometimes low electric power prices. Some early California wind projects, mentioned in the book, seemed mostly about capturing generous investment incentives rather than long term power production. Many of these didn’t last long enough to meet their initial PURPA-based contract obligations. Texans tried to avoid the worst of the California policy experiences. (Turbine reliability has improved over the years, but remains an important issue in Texas and everywhere else.)

The book goes into all of these issues and more, all along keeping in touch with the characters that moved the business along.

West Texas locations and people feature prominently in the stories, and since I grew up in Amarillo and now work in Lubbock, I got a special kick out of reading about the locals. I have met five or six of the people interviewed for the book (and also met author Kate Galbraith when she was in Lubbock last year), and I’ve seen many of the wind power projects mentioned as I’ve driven around the state. Maybe I have an overly positive reaction to the book for personal reasons.

Still, I think the book provides a good review of the development of the industry. Whether you support or oppose wind power policies, this book will improve your understanding of the industry in Texas. It would provide a useful supplemental text for college courses on the wind power industry and renewable energy policy.

Algernon Sidney on absolutism and political power

Lynne Kiesling

One of my favorite political theorists is Algernon Sidney (1623-1683). Sidney’s most famous work is Discourses Concerning Government (1698, published posthumously because Sidney had been executed for treason by Charles II). In addition to his motivation to write in response to the absolutism and authoritarianism of both Oliver Cromwell (whom he considered a tyrant) and the Stuart kings of England, Sidney wrote against absolutism and the divine right of kings in response to Robert Filmer, a pro-monarchy theorist. According to Wikipedia (and this summary accords with my understanding):

For Sidney absolute monarchy, in the form practiced by Louis XIV, was a great political evil. His Discourses Concerning Government (the text for which Sidney lost his life) was written during the Exclusion Crisis, as a response to Robert Filmer‘s Patriarcha, a defence of divine right monarchy, first published in 1680. Sidney was quite opposed to the principles espoused by Filmer and believed that the Sovereign’s subjects had the right and duty to share in the government of the Realm by giving advice and counsel. It was Filmer’s business, he wrote, “to overthrow liberty and truth.” Patriarchial government was not ‘God’s will’, as Filmer and others contended, because the “Civil powers are purely human ordinances.”

Chapter 3 of Discourses contains important parts of Sidney’s argument, and shows his application of classical Roman political theory to argue for a republican form of government grounded in the participation and power of the governed. In it Sidney says that

That which is not just, is not Law; and that which is not Law, ought not to be obeyed.

You may think that Sidney’s arguments have a lot in common with John Locke’s, and you’d be correct. But Sidney goes even further than Locke. Locke argued that those living under a despotic or tyrannical government, living under illegitimate power, have the right to revolt against that government because the power of the government derives from the individuals in the society. Sidney says that not only do those living under illegitimate political power have the right to revolt against that government, but that people living under illegitimate power have a moral duty to revolt against that government.

Sidney was second only to Locke in influence among the American founders and those who forged the institutions of the United States and who put forward the arguments for rebellion against the British government.

Just sayin’.

OPEC: Threat or menace…?

Michael Giberson

… or a clumsy cartel causing excessive volatility in world oil prices, or maybe none of the above. Earlier this week the Cato Institute hosted a discussion of a recent report by Andrew Morriss and Roger Meiners, “Competition in World Oil Markets: A Meta-Analysis and Review.” Panelists included Morriss, FedEx chairman Frederick Smith, and SMU economist James L. Smith. Jerry Taylor coordinated the program.

Of the group of panelists, I think it is J. Smith that has the best handle on the evidence — which unfortunately is all over the map. Yes you can find evidence that OPEC has manipulated oil prices and contributes to instability, but your can find comparable evidence suggesting OPEC has had no real effect. My preferred view is that Saudi Arabia has had an ability to swing prices up or down a bit at the margin–they being the one country willing to maintain excess productive capacity and manage it with an eye to long-run price levels. On J. Smith’s discussion of the evidence, perhaps I should become more agnostic on the matter.

If you, too, have an opinion about the effect of OPEC on world oil markets, then you ought to listen to the program and consider whether your view is well supported by detailed studies of the issue.

ADDED: Mentioned in the discussion is James Smith’s Journal of Economic Perspectives article, “World Oil: Market or Mayhem?“, available free online.

“The U.S. has thousands of energy strategies”

Michael Giberson

The Wall Street Journal printed a letter to the editor from Dick Gillette which gets right the response to calls for a unified U.S. energy strategy. Business Roundtable President John Engler earlier had complained the United States had no energy strategy and concluded that the nation was missing valuable opportunities because of it.

Gillette responded:

Regarding the April 3 letter from Business Roundtable President John Engler: Why are we all obsessed with our energy strategy? We are far less concerned with our manufacturing strategy and not at all about our retail strategy, as far as I can see. Why do we need an energy strategy at all, and who is “we”? Private capital has done a pretty good job of keeping our tanks full over the years without smothering GDP. “We” didn’t develop hydraulic fracking, or discover oil in North Dakota or spend billions to build refineries. Private capital did that, so what is it that “we” think we have to offer? As evidenced by Rep. Chris Van Hollen’s proposed bill to tax energy companies more heavily than other industries, in Washington an energy strategy is really just about money.

In fact, the U.S. has thousands of energy strategies. Some will succeed, some will fail, as always. But there is no reason to believe our tanks won’t be full at affordable prices for decades into the future.

Yes, thousands of energy strategies in this country, perhaps even millions. When values are diverse and knowledge is dispersed, letting a thousand energy strategies bloom really is the best approach.